A construction mortgage approval is an important milestone. But before you commit to trades, order materials or start excavation, there is another question to answer: when will the money actually be available?
Construction financing is commonly advanced in stages, called draws, as a project progresses. Each advance must meet the lender’s conditions. Understanding those conditions—and the cash you need between advances—helps you build a financing plan that supports the construction schedule.
For small builders developing infill, multiplex or multifamily projects in BC and Alberta, the draw structure deserves as much attention as the approved loan amount and interest rate.
How do construction mortgage draws work?
A draw is an advance from your construction facility. Rather than releasing the entire construction budget at the beginning, the lender makes funds available as the project reaches agreed stages or eligible costs are verified.
For example, RBC describes construction mortgage advances tied to progress and inspections. That illustrates the staged approach; its residential example is not a universal schedule for commercial or multiplex projects.[1]
Your own financing commitment should establish how advances are calculated, what must happen before the first draw, and what documentation subsequent draws require. Depending on the lender and project, the review may involve an appraiser, inspector or quantity surveyor—a consultant who assesses project costs and progress.
Before accepting financing, understand whether your facility follows construction milestones, periodic cost reviews or another agreed process. A supplier’s invoice alone may not satisfy the advance conditions.
Why can an approved project still face a cash-flow gap?
The timing of your expenses may differ from the timing of your mortgage advances.
A trade may require a deposit before starting. Materials may need to be ordered before they are installed. An inspection may need to take place before the lender can review a draw request.
That creates a practical question: what will pay those expenses while you are waiting for the next advance?
Equity invested in the property and cash available in your account serve different purposes. Confirm how the lender recognises your land equity, whether additional cash must be invested first, and how much liquidity you need to carry the build between advances.
A useful preparation step is a rolling cash-flow forecast showing upcoming expenses, expected draw submissions and realistic funding dates. Include room for a delayed inspection or an incomplete submission.
What should you clarify before the first draw?
Ask for clear answers to these questions before committing to the construction schedule:
- Equity: What must you contribute, and when?
- Eligible costs: Can the facility fund deposits, off-site materials, professional fees, permit charges and taxes?
- Draw calculation: Is funding based on verified costs, progress, value or a combination?
- Reporting: Who performs inspections, what reports are required and who pays for them?
- Holdbacks: What will be retained, who administers it and what permits release?
- Timing: What happens between submitting a complete request and receiving funds?
- Changes: How are overruns, substitutions and change orders approved and funded?
- Interest: Is interest paid monthly, funded through a reserve or handled another way?
Do not assume another builder’s experience with the same lender means your facility will operate identically. The written terms for your project govern.
Why does the remaining budget matter?
A draw review can examine both completed work and what remains to be built. Construction inspections help lenders compare requested advances with actual progress and identify deviations from the approved project.[2]
“Cost to complete” means the estimated expenditure still needed to finish the project. If costs increase, the original budget may no longer reflect that amount.
Keep an updated budget that separates money already spent, committed contracts, remaining work, approved changes and contingency. Raise a potential shortfall early so the lender can explain what additional equity, revised terms or other action may be required.
A larger approved facility should never be assumed to cover an overrun automatically.
How should builders plan for holdbacks?
A gross draw amount may differ from the cash available to spend after applicable deductions or retained amounts. Statutory lien holdbacks and additional lender reserves also serve different purposes; clarify both.
In BC, the Builders Lien Act generally requires a 10% holdback on applicable contracts and subcontracts, calculated under the Act, with exceptions. Its holdback period is generally 55 days after the applicable completion or other statutory trigger—not simply 55 days after every invoice.[3]
Alberta has its own legislation. Do not apply BC’s rules to an Alberta project. Have your construction lawyer confirm the applicable requirements, administration and release conditions, and reconcile them with the lender’s instructions.
Keep retained funds separate from the working cash you expect to use for upcoming trades.
A hypothetical example of cash needed between draws
Consider a builder who expects a $200,000 advance after the next milestone is verified. Before the draw can be submitted, the builder has $90,000 of payments coming due.
The builder has $55,000 of available project cash. The immediate funding gap is therefore $35,000.
Even if the lender ultimately approves the full expected advance, it does not solve expenses due before that money arrives. Any deductions, retained amounts or reduced eligibility could change the eventual net proceeds as well.
This simplified example is not a lending formula. It demonstrates why your cash-flow forecast must follow payment dates and advance conditions, rather than just the total approved mortgage.
Prepare a consistent draw package
Confirm the lender’s requirements, then keep a repeatable package ready. It may include:
- A draw request using the required format.
- An updated budget and cost-to-complete summary.
- Supporting invoices and evidence of payment where requested.
- Approved change orders and explanations of budget changes.
- The required progress report or inspection.
- Updated schedule, insurance and other requested documents.
Use consistent budget categories throughout the project. Explain differences clearly so the reviewer can reconcile your request without chasing missing information.
Common questions about construction draws
Is there a standard number of draws?
No single schedule should be assumed. Confirm the number, frequency and conditions in your specific facility.
Will the lender reimburse every expense?
Not necessarily. Eligible costs and advance calculations depend on the commitment. Confirm treatment before incurring unusual or upfront expenses.
Does project completion automatically release all remaining money?
Do not assume so. Ask about final reporting, completion requirements, liens, holdbacks and any conditions attached to the final advance.
Structure the financing around your build
At Akali Capital, we review the financing request alongside the budget, construction schedule and intended exit. We meet with lenders regularly to understand their appetite and present projects to suitable capital sources.
Our role includes helping you compare the structure and negotiate the terms while you focus on managing the build and your trades.
If you are planning an infill, multiplex or multifamily project in BC or Alberta, reach out before cash flow becomes urgent. Send your property details, project stage, budget, financing requirement and timing to gary@akalicapital.com, or call 604.657.6060.
Financing and draw availability remain subject to lender approval and the facility’s terms. Confirm project-specific lien and holdback requirements with your lawyer.